North Carolina school vouchers won’t hurt public school budget

The collision of budgetary distress and school vouchers has produced a familiar financial accusation in North Carolina. But an honest accounting of the state’s new scholarships for low-income children finds no conflict with public school spending.

This is not meant to diminish the political fight over the budget there. After all, North Carolina is ranked 45th in per-student spending and 46th in teacher pay, and has been dropping in those rankings in recent years. Even some Republicans voted against the 2013-14 budget this week as the party sent a lean appropriations bill to Republican Gov. Pat McCrory on Wednesday.

The point, rather, is that the education budget is made no worse by the inclusion of a $10 million voucher program for low-income students.

Various activists and commentators have tried to make the opposite case, one portraying  school vouchers as “siphoning public dollars away,” another saying private schools “seek to profit off of public schools,” another finding incongruity in not giving teachers raises while “pumping public funding into a voucher program.” The Progressive Pulse blog wrote “the larger the program becomes, the more money it will lose for North Carolinians.”

The Pulse based its claims on a legislative fiscal evaluation of the scholarship program that was previously approved in the House, but pointedly ignored the local tax savings. When local and state are combined, the evaluation put the five-year savings at between $23.4 million and $52.3 million.

What’s more, the savings are likely to be much greater because the evaluation used a methodology that, to put it charitably, is outside the mainstream.

Before we get into the mechanics, let me disclose that I was asked to help parental school choice advocates in North Carolina examine the fiscal questions and have been involved in numerous such assessments in Florida and other states. So I claim more than a passing knowledge in this arena.

The basic financial backdrop for the N.C. scholarship is this: The maximum scholarship is $4,200, which is almost precisely half the total per-student public school spending, $8,436, in 2011-12. The scholarship is only for lower-income students who, for the most part, must otherwise have been attending a public school to be eligible. In fact, in the first year, the bill requires that every scholarship student come from a public school. This tells us essentially that each student who switches from a public school to the scholarship will save the state money and, in turn, that most students will be switchers. That’s a formula for savings.

The state fiscal analyst took a more cautious approach, as is generally appropriate. He decided not to include any federal spending as potential savings, and decided to put the local savings in a separate pot. Further he counted only 91 percent of the $5,361 state portion as the savings for each student who switches from a public school to the scholarship program. The result is a savings per student of $881.

These hefty discounts could be defended if the analysis didn’t then run off a cliff. To determine how many students would have been attending a private school anyway – and thus save the state no money – the analysis treated the scholarship like a discount on airfare. It used a commodity pricing formula that looks only at how changes in price motivate consumer behavior, ignoring the multitude of factors that lead a parent to change schools – including such things as perceived quality, desired location, and peer influence. Adding to the distortion was a formula that calibrated the scholarship as a 52 percent discount on tuition, which ignores the history in other states, such as Florida, where many private schools accept the scholarships as full payment (Florida’s scholarship last year was $4,335).

As such, the number that jumps off the analytical page is the forecasted proportion of scholarship students in the second year who would have been in private school anyway: 30 percent.

Let’s ponder that number, 30 percent, for a moment. Under the bill that is awaiting the governor’s signature, all students in Year 1 must have switched from public schools and most would be returning in Year 2. Then, in Year 2, all new students entering grades 2-12 must have switched from public schools. So if the grades fill up in roughly equal fashion, that leaves only 15.4 percent of the students and a handful of foster and recently adopted children who could possibly have attended a private school anyway. And the analysis itself, using Census data, reports that only 37 percent of the K-1 students would qualify based on their income.

So these three factors suggest a no-savings proportion more in the range of 4 percent – not 30 percent. In other words, the “price elasticity formula” significantly understated the savings – a fact few observers seem to have noticed.

Financial savings need not be a goal for any education program, especially one aimed at giving options to low-income children. But the salient financial fact about the N.C. scholarship program that passed through both chambers on Wednesday is that it produces no adverse impact on public school budgets. The numbers speak for themselves.

Avatar photo

BY Jon East

Jon East is special projects director for Step Up For Students. Previously, he was a member of the editorial board and the Sunday commentary editor at the St. Petersburg Times, Florida’s largest daily newspaper, where he wrote about education issues for most of his 28 years at the paper. He was also a reporter and editor at the Evening Independent and Ocala Star-Banner. He earned a journalism degree from the University of North Carolina at Chapel Hill.